British Energy shares jumped 9% yesterday as the utility dogged by worries over ageing reactors was buoyed by the prospect of more UK nuclear development and partnerships with other European utilities.
The stock lifted 44p to 533p despite a nine-month report showing earnings before interest, tax, depreciation and amortisation down 4% to £745m and basic earnings per share drooping by a third to 41.6p. Operating profit slid 10% to £563m.
The figures beat most analysts' expectations, and a special dividend of 14.5p, in line with forecasts, will be paid out in April. Operating costs rose by £2m to £28.1m, due to the chronic maintenance problems at various reactors.
Tina Cook, analyst at Charles Stanley, said: "I think investors are beginning to look more towards longer-term prospects and I think that's why you see a positive reaction in the share price," she added.
Broker Cazenove said: "The fundamentals of the investment case continue to improve with high electricity prices, lifetime extensions for plants and the ever-growing likelihood of new nuclear build."
In a note, Citigroup analysts said: "There was a risk (albeit a relatively small one) that BE would pass on the additional dividend. The fact that it hasn't shows that the com-pany is confident that it can meet its current investment needs out of cash to be generated in 2007-08 and beyond."
Despite outages at various reactors so far this year, nine-month total output increased to 45.7 terawatt hours (twh), up from 44twh last time.
However, doubt still looms over the company's projected 2008-09 production figures, which will determine the cash flow available for any future special dividend. Bill Coley, chief executive, said the level of losses was "having a significant impact" on the projections, which envisage at least 50twh.
The four units at Hartlepool and Heysham 1 remain out of service following problems in the boiler units, and these will not be back until the second half of the next financial year.
Citigroup said that based on historical precedents output (for 2008-09) could be as low as 40twh.
British Energy has said it is in talks with "10-plus" possible partners to build more reactors in the UK, and that agreement might be reached by the end of March. Coley said there might possibly be "a couple of partnerships". The utility has not ruled out developing other wind farms in the UK even if its proposed Isle of Lewis wind farm is rejected by the Scottish Government.
The controversial Lewis project - a joint venture with Amec - has prompted a 5000-signature petition to Holyrood.
Coley said: "Whether or not we pursue Lewis will not have a bearing on whether or not we would consider wind farms elsewhere."
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